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Why European Lithium Ltd shares crashed 26% lower today

The European Lithium Ltd (ASX: EUR) share price has been one of the worst performers on the market today with a sizeable drop lower.

At the time of writing the lithium miner’s shares are down 26.5% to 23.5 cents.

What happened?

Yesterday the company announced plans to raise up to $5 million through a share placement at a price of 22.5 cents per share.

Furthermore, it will issue one free attaching unquoted option for every four shares applied for under the placement and 14.4 million options to facilitators of the placement which are exercisable at 25 cents per share.

Whilst this is a sizeable discount to its last close price of 32 cents, it is worth noting that just one month ago the European Lithium share price was 5 cents.

Management intends to use the funds to expedite the definitive feasibility study drilling programme at its Wolfsberg Lithium Project in Austria. This is expected to help the company better understand the size and value of the deposit in zone two, which earlier drilling showed to be a very prospective area.

Should you invest?

I don’t think European Lithium is ready to be invested in just yet. There’s no doubt that the Wolfsberg Lithium Project has a lot of promise, but almost all of this has been built into its share price already.

I would suggest investors sit tight and watch on from the safety of the sidelines whilst its drilling programme is undertaken.

Other lithium shares to watch in 2018 include Lepidico Ltd (ASX: LPD) and Kidman Resources Ltd (ASX: KDR).

Did you miss the lithium boom? If you did, don't miss out on the next boom.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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